Malaysia Sets Zero Export Tax for Crude Palm Oil to Cut Reserves

Dec. 17 (Bloomberg) -- Malaysia will allow crude palm oil
exports at zero duty in January as the world’s second-largest
producer seeks to reduce record stockpiles that drove prices to
a three-year low last week.

The average price for calculating tax on shipments was set
at 2,147.81 ringgit ($702) a metric ton for January, the customs
department said in a notification today. That’s below the
minimum threshold of 2,250 ringgit a ton for tax to be applied,
it said.

Palm oil, used in everything from instant noodles to soap
bars, slumped to 2,217 ringgit a ton on Dec. 13, the lowest
price since November 2009, as output in Indonesia and Malaysia,
the biggest producers, outpaced demand from China and India.
Malaysia announced a cut in taxes and abolition of a duty-free
export quota in October after inventories surged. The new tax
rates will range from 4.5 percent to 8.5 percent, rising as
prices climb from 2,250 ringgit a ton. The existing levy is 23
percent, according to the government.

“Export demand will pick up gradually in the coming days,
and may ease stockpiles a bit,” Chung Yang Ker, an analyst at
Phillip Futures Pte., said by phone from Singapore. “The
current price level is too low for producers.”

Annual Loss

The contract for delivery in February, the most-active by
open interest, gained 0.2 percent to close at 2,280 ringgit a
ton on the Malaysia Derivatives Exchange in Kuala Lumpur.
Futures lost 1 percent last week for a fourth weekly decline and
are heading for a 28 percent drop this year, the worst annual
loss since the financial crisis in 2008.

Exporters may take advantage of zero duty to ship as much
palm oil as possible in January, gradually reducing stockpiles
and boosting prices, Ong Chee Ting and Chai Li Shin, analysts at
Maybank Investment Bank Bhd., wrote in a report on Dec. 11.
Indonesia’s last year changed export taxes to make local crude
palm oil cheaper than in Malaysia, cutting cost for refiners.

Stockpiles in Malaysia climbed 2.3 percent, a fifth monthly
gain, to an all-time high of 2.56 million tons in November from
a month earlier, the nation’s palm oil board said Dec. 10.
Inventories may climb to at least 2.7 million tons by Jan. 1,
Dorab Mistry, a director at Godrej International Ltd., said on
Nov. 30.